Dow up 1pc, Nasdaq at highest in 14 years

After jumping as much as 20 per cent on Friday, the CBOE volatility index or the VIX, a barometer of investor anxiety, fell 6.31 per cent to close at 12.32 on Monday.
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by
Akane Otani

US stocks surged, with the Nasdaq closing at a 14-year high as increasing homebuilder confidence and hopes for receding tensions in Russia gave investors reasons to make bigger bets on the equity market.

The Nasdaq Composite ended above 4508, marking the first time since March 31, 2000, that the tech-heavy index closed above 4500 points. The S&P 500 extended last week’s gains, climbing to within 1 per cent of an all-time high.

“You’ve got good economic data, good corporate earnings and M&A deals moving the market forward, so the market is really coming back strong," said Doug Cote, chief market strategist with Voya Investment Management in New York.

“What you’re seeing is defensive investors throwing in the towel and saying, ‘I gotta be a part of this.’"

After jumping as much as 20 per cent on Friday, the CBOE volatility index or the VIX, a barometer of investor anxiety, fell 6.31 per cent to close at 12.32 on Monday.

Homebuilders’ stocks rose after the NAHB/Wells Fargo Housing Market Index showed that homebuilder sentiment rose for the third straight month in August.

The PHLX housing sector index climbed 1.7 per cent, lifted by a rally in major homebuilders, including PulteGroup, up 2.8 per cent at $US18.78, and D.R. Horton, up 1.4 per cent at $US21.13.

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Ambiguity lingered in Russia, where tensions with Ukraine have recently rattled markets. Russian officials said on Monday that while all issues related to the country’s humanitarian convoy to Ukraine had been resolved, progress had not been made on reaching a cease-fire.

Yet investors’ appetite for stocks seemed little dampened by headlines from abroad on Monday. Brent crude oil hit a 14-month low as Kurdish forces made progress against militants in Iraq and the Kiev military reported new successes against pro-Russian separatists in Luhansk.

The Dow Jones industrial average jumped 175.83 points, or 1.06 per cent, to close at 16,838.74. The S&P 500 rose 16.68 points, or 0.85 per cent, to 1971.74. The Nasdaq Composite added 43.39 points, or 0.97 per cent, to close at 4508.31.

Bidding war for Family Dollar

A flurry of merger and acquisitions activity gave stocks a boost. Discount retailer Dollar General offered to buy Family Dollar Stores for $US8.95 billion, driving Dollar General shares up 11.6 per cent to $US64.14 and pushing Family Dollar shares up 4.9 per cent to $US79.81.

The two stocks were the S&P 500’s biggest percentage gainers.

Sensors and electrical controls maker Sensata Technologies Holding NV said it would buy the Schrader group of companies in a transaction that valued the business at $US1 billion, including debt. Sensata shares rose 5.8 per cent to $US48.84.

Shares of Urban Outfitters gained 2.4 per cent to close at $US36.92 ahead of the clothing retailer’s earnings report, which were released after the bell. Following the quarterly results, Urban Outfitters shares fell 1.7 per cent in extended-hours trading. The youth-oriented clothing retailer beat analysts’ estimates on earnings, but said comparable retail segment net sales were flat in its latest quarter.

About 4.5 billion shares traded on all US platforms, according to BATS exchange data, compared with the five-day average of 5.2 billion.